Memorex 2007 Annual Report Download - page 89

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reporting units in Step one of the impairment test at November 30, 2007 and goodwill related to these reporting units is as
follows:
Goodwill
Excess of fair
value over
carrying value
(In millions)
Americas-Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.5 $81.8
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 69.0
Electronic Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.6 18.8
Based on the goodwill analysis performed as of November 30, 2007, a change of 1 percent in the discount rate
utilized corresponds to an implied stock price change of $0.75 and would change the fair value for the respective business
units as follows:
Change in Fair
Value from a
1% Decrease in
Discount Rate
Change in Fair
Value from a
1% Increase in
Discount Rate
(In millions)
Americas-Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.0 $(15.0)
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0 (10.0)
Electronic Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 (5.0)
The TDK Recording Media acquisition included contractual provisions which require the purchase price to be adjusted
if actual net assets received differ from a contractually specified target. The Company is finalizing negotiations to determine
the purchase price and allocate tax bases to the assets purchased. In determining the purchase price of the TDK
Recording Media acquisition, the Company made its best estimate of the outcome of this settlement process and of
allocation of basis for tax purposes. If the ultimate settlement differs from the Company’s estimate, adjustments to the
purchase price, the amount of goodwill and its respective tax basis may be required. To the extent that these adjustments
are allocable to the reporting units where goodwill is impaired, the amount of the recorded impairment will be adjusted in
future periods. The Company expects to complete the determination of the final purchase price in the first half of 2008.
Note 7 — Investments
Our venture capital and minority equity investment portfolio consists of investments of $8.1 million and $9.7 million as
of December 31, 2007 and 2006, respectively. These investments are accounted for on the cost basis. The carrying value
of these investments has been reduced by other-than-temporary declines in fair value of $6.3 million and $7.7 million as of
December 31, 2007 and 2006, respectively. As of December 31, 2007, we do not have any other investments with
unrealized losses that are deemed to be other-than-temporarily impaired, nor were there any investments for which the fair
value was less than the carrying value.
Note 8 — Debt
On March 30, 2006, we entered into a credit agreement with a group of banks that were party to a prior credit
agreement, extending the expiration date from December 15, 2006 to March 29, 2011. This credit agreement was
amended on July 24, 2007 and the following changes were made to the credit agreement (as amended, the Credit
Agreement): (i) increased the credit facility from $300 million to $325 million and added an option to increase the facility to
$400 million at a future date; (ii) extended the term for an additional year to March 29, 2012; (iii) permitted the Company’s
acquisition of the TDK Recording Media business; (iv) increased the guarantee of foreign obligations limit and letter of
credit sub-limit; (v) modified the fixed charge coverage ratio definition and (vi) reduced the applicable interest rates. The
Credit Agreement provides for revolving credit, including letters of credit. Borrowings under the Credit Agreement bear
interest, at our option, at either: (a) the higher of the federal funds rate plus 0.50 percent or the rate of interest published
by Bank of America as its “prime rate” plus, in each case, up to an additional 0.50 percent depending on the applicable
leverage ratio, as described below, or (b) the British Bankers’ Association LIBOR, adjusted by the reserve percentage in
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)